Transport and the economy

Memorandum from the PCS Union

Introduction

1. The level of cuts being contemplated to DfT’s capital budget and running costs will have a profound impact on the UK's long-term economic growth.

2. Whilst the Government has determined that it will make these cuts there is no reason why the Transport Committee has to agree that they are necessary or desirable in the Transport sector. It could conclude that these cuts cannot be made without seriously harming the economy.

3. Therefore we would hope that the committee will address the fundamental issue of whether there should be budget reductions in the first place; if there does, whether they have to be as deep as 25% (possibly 33%).

4. The Prime Minister has indicated that the cuts will be permanent; that is once the structural deficit has been cleared spending will not rise back towards current real levels.

5. A permanent real cut in DfT capital expenditure will impact on the priorities for investment identified by the Eddington Transport Study, will retard "greening" transport and hence will lower long term growth. Again we hope the committee will address whether a permanent cut is desirable and to quantify it’s effect on UK long term growth.

6. Changes in economic growth and government spending impact on different groups within society in different ways. Therefore we hope that the Select Committee will examine the differential economic effects of the proposed changes in Transport spending. It is claimed that the cuts will be fair and that the reductions in spending are "progressive austerity". If that is the case then DfT should be put to strict proof to demonstrate the fairness, or other wise, on all groups within society (not only in terms of social class, ethnic groups etc but also geographically) of the proposed reductions in expenditure.

7. Lastly the Government is planning to greatly reduce civil service numbers in DfT. In our view, this attack on the department’s human capital will also impact on transport’s contribution to UK's long-term economic growth.

Priorities For Investment

8. The priorities for investment identified by the Eddington Transport Study concerned reducing congestion in urban areas, on key inter-urban corridors and at key international gateways.

9. Whilst these priorities remain important, in our opinion the major task of the department is to fundamentally change our transport systems; to move them from being run on fossil fuels to ones running on sustainable, clean energy; for public transport to be really accessible to all the public, not only in terms of coverage and capacity but in terms of price (public transport must be cheap enough for all to use). If these things are done then it will boost the UK's long-term economic growth.

Changing Our Transport Systems

10. Climate change, if unchecked, will have a devastating effect on our environment and hence economy. Moreover the capital expenditure involved in moving away from fuel based systems will boost the economy in itself.

11. Also by changing our transport systems as described above we would ensure against a Peak Oil crisis.

12. If oil reserves/exploration of those reserves do not keep pace with demand then consequentially petrol and diesel prices will rise in real terms year after year. Many commentators believe that these increases will be very sharp and that there will be fuel shortages. Such things will have a shattering effect on fuel based transport systems and the economy.

13. Unfortunately this Government, and the previous one, seem to believe that the transport systems of today hold good for the future. We profoundly disagree with that view.

More deaths caused by transport-related air pollution than by crashes

14. The move away from fossil fuels based transport also will have dramatic health benefits. Such benefits positively impact on the economy (reduced health costs; more workers available for work).

15. In March 2010 the House of Commons Environmental Audit Committee produced a report on Air quality which stated in the summary:

"Poor air quality reduces the life expectancy of everyone in the UK by an average of seven to eight months and up to 50,000 people a year may die prematurely because of it. Air pollution also causes significant damage to ecosystems. Despite these facts being known air quality is not seen as a priority across government and the UK is failing to meet a range of domestic and European targets.

"The quantified costs of poor air quality that are used to develop policy are out-dated. They do not take account of all the known health effects, treatment costs, and environmental damage, nor do they take account of fines that could be imposed by the EU for failing to meet air quality targets. Many Government departments do not seem fully to understand how their policies affect air quality, the impact poor air quality has, and its cost to the economy. Awareness of the issue needs to be raised at all levels of government, and policies need to take greater account of air quality impacts.

"Awareness needs to be raised and behaviour needs to change if air quality targets are to be met. Transport causes the most exposure to harmful air pollutants, and air quality targets will not be met without a significant shift in transport policy. Local authorities need to do more to tackle poor air quality, and they must be given information on how to develop local air quality strategies.

"The cost-benefit analysis is clear: what is needed is the political will to make this a priority and to commit the resources to address it now so that we can reap the benefits of improved health."

16. Page 5 of the report says:

"Industry and road transport are the main sources of air pollution, though domestic combustion and agriculture are also to blame. Industry is a major source of emissions of NOX (46%) and PM10 (36%). Road transport contributes to significant emissions of NO2 (30%) and PM10 (18%). Emissions and exposure vary greatly depending on location. Although polluting, the majority of large combustion plants are located away from major urban centres. Road transport contributes far more to the public’s exposure to pollutants and is responsible for up to 70% of air pollution in urban areas."

17. In one of the recommendations (at page 18 of the report) the Environmental Audit Committee said:

"Transport policy must change dramatically if the UK is to meet future targets and reduce exposure to air pollution. Much of this agenda is already being driven by efforts to tackle climate change (like modal shift and smarter travel choices) although some conflicts exist. In addition to improving existing policies, the Government must explain the role played by brake, tyre and road wear in generating particulate matter and research the impact of road surface particulate matter on air quality."

Noise pollution

18. The Executive Summary of the Defra paper, An Economic Valuation of Noise Pollution, dated 2008 says:

"Across Europe, increasingly, attention is turning to noise pollution and the detrimental impacts it has been suggested to have on the population. The rapidly growing literature surrounding noise pollution highlight a wide range of costs including loss of amenity, adverse health impacts, slower learning rates in children, irritation and effects on local ecology. In response to these considerations there has been a significant movement across the EU towards systematically managing noise with the first stage being the creation of detailed noise maps and the development of localised action plans.

"Based on the existing evidence, initial estimates of the cost of noise pollution suggest that it is currently imposing a cost in excess of £7 billion per annum1. This estimate is made up of between £3 - £5 billion in annoyance costs, adverse health cost of around £2 - £3 billion and productivity losses of another £2 billion. Therefore, even where best practice is being observed this means monetised impacts could be around half their true value."

19. The move away from fossil fuels based transport would greatly reduce noise pollution (electric cars, for example, are virtually noiseless) and help the economy by greatly reducing the costs estimated above.

Cost of Public Transport

20. DfT admits that between 1980 and 2009, bus and coach fares increased by 54 per cent and rail fares increased by 50 per cent respectively in real terms. Such increases impact on competitiveness and growth.

21. The departmental is carrying out a fundamental review of its expenditure. This will look at, amongst other things, the existence and size of the Bus Service Operators Grant and concessionary travel.

22. It seems to us that the consultation on train franchises will lead to the Train Operating Companies being allowed to raise fares in return for less subsidy.

23. Even before the election it was acknowledged that the public would pay more for train travel. Indeed it is official DfT policy that a greater proportion of railway costs be recouped through train fares; in other words through higher train fares.

24. A Guardian article dated 22 February 2010 said:

"The funding balance between passenger and taxpayer is a particularly important issue for rail travellers, because the farepayer is expected to pay for 75% of the industry's cost by 2014 – the equivalent of £9bn per year."

25. When asked by the union if they had equality-proofed this proposal, to check the effects of increasing rail fares will have on the poor, ethnic minorities etc, DfT admitted that they had not. Such an assessment would have concluded that the poor and ethnic minorities (both categories over lap) would be adversely effected.

26. The overall effect of the above and other measures will be, in our opinion, further and faster real increases in the price of public transport. Such rises will tend to "price" passengers off, make car travel (all least in advance of Peak Oil effects) cheaper in real terms.

27. This means that certain sections of the population will literally be less mobile. This will impact on the UK economy.

Fair Cuts?

28. The TUC and Unison have commissioned a unique study which "attempts to set out the value of the benefits of services, using a new model of the distribution of public spending across households in the UK". The report also uses this analysis to estimate the losses to households as a result of the Government’s proposed cuts in public spending by 2012-13, as well as discussing the impact of the fiscal consolidation measures

as a whole (that is, including the impact of changes to taxes and benefits)". Please see: http://www.tuc.org.uk/extras/wherethemoneygoes.pdf

29. In the summary of that report (page 9) it states the coming "cuts will also be

regressive, with the poorest tenth of households losing income and services

equivalent to 20.3% of their household income, compared to just 1.5% for the richest tenth of households". It seems to us that DfT should provide this sort of analysis as to the effect of the proposed cuts. The department is legally bound to produce equality impact assessments of its polices but our experience is that these tend to be inadequate, if they are done at all.

30. As said above DfT should be put to strict proof to demonstrate the fairness, or other wise, on all groups within society (not only in terms of social class, ethnic groups etc but also geographically) of the proposed reductions in expenditure.

Human Capital

31. Current plans suggest that up to a third of staff in the central department will be shed and possibly a similar percentage in the other parts of the department as well.

32. It is almost fashionable to denigrate civil servants yet without skilled staff DfT cannot deliver its plans.

33. Many organisations have learnt to their cost that shedding experienced staff means that they lose capacity to deal with future changes.

34. An interesting case study is that of the Highways Agency (HA). In the mid 1990s the department exited many experienced engineers and administrative staff in keeping with cuts in the road programme. They then found, when the road programme was revived, that they did not have sufficient in house capacity and had to buy in much more expensive consultants (the legacy of which is that HA still has hundreds of consultants on the books). Moreover they had to recruit staff to make up for the cuts made. This was well documented in the NAO report on estimating and monitoring the costs of building roads in England in March 2007 (HC321 Session 2006-07).

35. Ministers cannot now, foretell, what the future holds. To cut DfT’s planning and administrative capacity must mean that the department will be less able to handle future policy changes. This lack of capacity will have a real, if subtle, effect on UK's long-term economic growth. We believe therefore TRANSOM should inquire into this loss of human capacity.

September 2010